Microfinance and HIV/AIDS DONOR INFORMATION RESOURCE CENTRE Helping to Improve Donor Effectiveness in Microfinance www.microfinancegateway.org
PRESENTATION INSTRUCTIONS • This is a DIRECT presentation designed for microfinance donors. These slides may be used or changed without permission. Attribution to CGAP/DIRECT is appreciated. • Slides are accompanied by notes. • To view notes, select from the PowerPoint menu: View/ Notes Page. Scroll to advance to next page. • To print notes, select File/ Print/ Print what: Notes Pages. • To print handouts of just slides (no notes), select File/ Print/ Print what: Handouts. Then enter the number of slides to print per page. • For optimal printing on a black-and-white printer, select from the menu: File/ Print/ Pure Black and White. December 4, 2003
Overview How does HIV/AIDS affect poor households? How can financial services best be used in communities grappling with HIV/AIDS? How can financial institutions be effective in affected areas? What can donors do to support an effective microfinance response to the HIV/AIDS crisis?
People with HIV/AIDS Caribbean 1% Latin America 4% North Africa and Middle East 1% North America 2% Sub-Saharan Africa Western Europe 1% 71% Eastern Europe/Central Asia 3% East Asia and the Pacific 3% South and Southeast Asia 14% Australia and New Zealand <1% • As of the end of 2002, an estimated 42 million adults and children were living with HIV or AIDS • Over 95 percent of them live in less developed countries Source: UNAIDS, AIDS Epidemic Update 2002 .
How Does AIDS Affect Poor Households? Poverty deepens Vulnerability to A vicious cycle disease increases for poor people Ability to protect against further economic losses decreases
Lost income of a sick adult Lost economic productivity of healthy adults who Why does become caretakers income decline in Dramatic increases households in household where expenses persons suffer from HIV/AIDS?
• Liquidate savings • Reduce food consumption • Borrow from formal and informal sources • Cut back on non- How do essential expenses households • Sell assets, further handle reducing the ability economic to earn income in stress ? future
Financial services alone cannot solve the repercussions of HIV/AIDS BUT Access to a broad range of financial services (especially savings) can help households build a safety net to deal with the impact of the disease
Help clients maintain or How can increase income Provide clients with an financial opportunity to build savings services which are secure, easy to help liquidate quickly, and retain value mitigate the Reduce clients’ vulnerability to economic loss impact of Enable clients to avoid HIV/AIDS? irreversible coping strategies that destroy future income earning (i.e., selling productive assets such as land or farming equipment)
Individuals who are HIV-positive, but still productive Productive family members of HIV- Who can use positive individuals financial services in Surviving spouses, regions children, or parents affected by HIV/AIDS? Households unaffected by HIV/AIDS
Flexible savings Education trusts for minors Emergency loans What products and Burial insurance policies are responsive to Loan insurance their needs? Acceptance of younger and older clients
How Can Financial Institutions Be Effective in Heavily-Affected HIV/AIDS Areas? Linkage Approach Portfolio Management Risk Management
Linkage Approach MFIs can provide basic messages on HIV/AIDS prevention and care MFIs can refer clients to specialized providers of health and insurance services EXAMPLE: FINCA/Uganda negotiated an insurance plan for its clients with Microcare, a health-plan provider that offers coverage of acute HIV/AIDS episodes
Portfolio Diversification MFIs can operate successfully in communities affected by AIDS by maintaining a diverse portfolio Explicitly targeting persons living with AIDS can: – impair an MFI’s ability to achieve sustainability and scale – overburden clients with debt they cannot manage
Risk Management Financial institutions should prepare by : Planning in advance how to respond to clients in crisis Planning for reduced savings rates Monitoring for higher dropout, absentee, and (possibly) default rates Strengthening management information systems Adjusting loan-loss provisioning
Avoid explicit targeting What can donors do to support an Facilitate the Encourage effective exchange innovative and microfinance linkages and dissemination response to the strategic of lessons partnerships HIV/AIDS crisis? learned Support financial institutions that are focused and specialized
Avoid pushing MFIs to launch operations in Avoid markets specifically to Explicit respond to the HIV/AIDS crisis Targeting Help MFIs already working in heavily-affected regions to manage the risks Also support organizations able to provide grants instead of financial services
Better understand the prevalence of HIV/AIDS and Facilitate the its impact on clients and MFIs Exchange and Improve the ability of MFIs to Dissemination respond to the crisis (e.g., of Lessons workshops on operational planning) Learned Reduce the social stigma of HIV/AIDS Develop guidelines on non- discriminatory HIV/AIDS workplace policies
Only sustainable, efficient Support Financial MFIs can provide communities affected by Institutions HIV/AIDS with permanent That Are access to financial Focused and services Specialized Most integrated programs have poor results for clients
Strategic alliances can provide opportunities for: Encourage MFIs and HIV/AIDS programs to Linkages cross-refer eligible clients MFIs to invite HIV/AIDS NGOs to and provide information on prevention, Strategic care, and support topics HIV/AIDS groups to gain insights Alliances from microfinance staff and clients on income-earning topics MFIs to reduce research costs for lending innovations by using information gained from HIV/AIDS projects on clients’ economic coping strategies
• In Zimbabwe, USAID funded training for staff from 15 MFIs on Donor assessing the impact of HIV/AIDS on clients, staff, product demand, Good and financial results Practice • The training included a strategic planning exercise Example • MFIs requested subsequent training on how to adapt financial products to HIV/AIDS settings • After the training, seed funding to pilot test new or modified products was granted
Summary Households affected by HIV/AIDS can use microfinance services as one way to protect their economic resources Launching a financial intervention specifically targeted at persons with AIDS is not generally appropriate, since financial services depend on the on-going ability of clients to earn income MFIs that operate in hard-hit regions can benefit by planning for the institutional risk posed by HIV/AIDS Donors can help by encouraging innovative linkages and strategic partnerships between strong MFIs and organizations providing HIV/AIDS-related services
Where to Get More Information • Jill Donahue, Kamau Kabbucho, and Sylvia Osinde, HIV/AIDS — Responding to a Silent Crisis (Nairobi, Kenya: MicroSave-Africa, 2001). • Joan Parker, MBP Microfinance and HIV/AIDS Discussion Paper (Washington, DC: USAID/MBP, 2000). • Joan Parker, The MBP Reader on Microfinance and HIV/AIDS: First Steps in Speaking Out (Washington, DC: USAID/MBP, 2000). • Joan Parker, Ira Singh, and Kelly Hattel, The Role of Microfinance in the Fight Against HIV/AIDS ( Development Alternatives, Inc., report to the Joint United Nations Programme on HIV/AIDS, Washington, D.C., 2000). Contact: Nata š a Goronja 1818 H St., NW, Washington, DC 20433 Tel: 202-473-9594 Fax: 202-522-3744 E-mail: cgap@worldbank.org Web: www.cgap.org
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